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Showing lower profit than 8% still audit not required

vidya burman (student) (15 Points)

18 December 2019

Suppose a business entity has a turnover of 80 lacs and is showing profit of 2% . Whether it is mandatorily required to do audit of books of accounts?

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8 Replies

Himanshu (I ) (11 Points)
Replied 18 December 2019

Yes as pe section 44 AD of act if person show income. Lower than 8% or 6% as the case may be liable for audit of books of accounts

CA ABHAY GUPTA (Practice) (3230 Points)
Replied 18 December 2019

Section 44AB(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,
get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

in ur case 2% of 80 lakhs will be 1.60 lakhs which is lower than max amt nt chargeable to tax which 2.5 then no need to get tax audit..
my point of view others expert opinion are welcome..

RAJA P M ("Do the Right Thing...!!!") (127537 Points)
Replied 18 December 2019

First of we don't be consider the query with sec 44AD. Just ask the details to Querist for the filing of return...

If the filing is u/s 44ad then audit is applicable as lesser profit showing. No way for considering sec 44AB(e) for business entity.

If filing with sec 44AA then Tax Audit not applicable if showing the above said Profit...

@ Mr Vidya Burman.

Can You elaborate with more details for Your query...?!

1 Like

Kapadia Pravin (17249 Points)
Replied 18 December 2019

@ Miss Vidya

Turnover is 80 lakhs hence no tax audit under 44AB

If Assessee opts for 44AD (it's not mandatory / it's optional) then 2% profit will invite mandatory tax audit .

I hope this will suffice for your academic knowledge and purpose.

With best wishes for your studies....👍

CA ABHAY GUPTA (Practice) (3230 Points)
Replied 19 December 2019

@ Raja ji and @ Kapadia Ji there is a clause in 44AĎ to get books audited but it is not compulsory if your net profit does not exceeds maximum amount not chargeable to tax.. kindly refer section 44AB(e) rws 44AD...

RAJA P M ("Do the Right Thing...!!!") (127537 Points)
Replied 19 December 2019

Originally posted by : CA ABHAY GUPTA
	@ Raja ji and @ Kapadia Ji there is a clause in 44AĎ to get books audited but it is not compulsory if your net profit does not exceeds maximum amount not chargeable to tax.. kindly refer section 44AB(e) rws 44AD...

Yes, You are exactly correct Mr CA ABHAY GUPTA JI...

But, The Said limit (2.5 lakhs) is not applicable to All Taxpayers***... Right....?!

*** Taxpayers means Individual, HUF, Firm, Pvt Ltd, Ltd, LLP, Trust, .....

1 Like

Hari kiran (39 Points)
Replied 19 December 2019

Yes tax audit is required

CA MAYUR THAKKAR (Propritor) (65 Points)
Replied 20 December 2019

In fact It actually depends on whether you have filed your Income tax return under 44AD during past years.

From AY 2017-18, as per sec 44AB you have to get your account audited if your turnover exceeds Rs. 1Cr.

As per 44AD(d) once you file your itr under section 44AD during a year, you have to continue filing your itr under 44AD for next 5 years. if you want to to file less than 8% profit, you have to get yourself audited under sec 44AB(4).